Give Me Fuel, Give Me Fire, Give Me That Which I Desire

Well, there's a twist: the Clinton/McCain double-reverse pander on the gax tax is experiencing actual blowback. First the general economic community pointed out the folly, then Clinton-friendly economists did, then journalists on a conference call roll the campaign's flacks back on their heels.

"Every penny counts," [pollster Geoff] Garin said, and insisted that the holiday will save $70 per driver (not $30, as Obama claims).“If you live in the center of the city it may not be a big deal.”

"There’s a real gap here of how some people see this from 30,000 feet", he continued, and how North Carolina and Indiana residents "experience it every day."

“What driving do they want them to stop doing?” he asked.

Ooh-er, take that, you beltway-bound snobs! You can imagine the wheat stalk idling between his teeth as Garin rocks back and forth on his porch and cradles his shotgun. Meanwhile Michael Bloomberg, who is an urban billionaire (and whose state Republicans favor suspending the state gas tax), adds his own spicy demogoguery:

Bloomberg praised officials who opposed the “summer break on gasoline taxes which would help Chavez, Qaddafi and other people like that. I don’t know why anybody would want to do it.”

Can the efforts of basically every journalist and economist convince people that the tax holiday his a bad idea? I feel like they can't. How else to explain this mega-pander by Hillary Clinton, caught by Megan McArdle?

Hillary Clinton wants to sue OPEC for not producing oil from wells they haven't drilled yet. Next: a lawsuit against Ford for not building us the cool flying cars we were promised in The Jetsons. I WANT MY FLYING CAR!!!!

Question: Is Hillary Clinton still a senator? Is John McCain? Why haven't they introduced gas tax holiday legislation if it's such an urgent need for the yeomen of Indiana and North Carolina? This isn't one of those "when I'm president" promises—if you want relief for summer 2008, then legislate to make relief happen for summer 2008. The only reason you wouldn't is if it's, you know, a poll-tested fraud.

Comments

sage | May 1, 2008, 3:05pm | #

Why don't they instead send everyone a check for $100 to help with high gas prices?

Oh, wait...

BTW, nice Metallica reference. Not their best song, though.

joe | May 1, 2008, 3:07pm | #

That poor working stiff Hillary rode to work with looked like he was having a lot of trouble filling up the F-250 he commuted in.

Anyway, thanks for pointing out who really matters in this country, Garin.

Elemenope | May 1, 2008, 3:08pm | #

Next: a lawsuit against Ford for not building us the cool flying cars we were promised in The Jetsons. I WANT MY FLYING CAR!!!!

Seems reasonable. That shit was promised a half-century ago.

New World Dan | May 1, 2008, 3:09pm | #

If you want real relief from high gas prices, just dump 30 million barrels from the SPR on to the market. Then use the profits there to shore up the dollar and help finance the so called stimulas package. Plus, it'll keep commidty speculators from bidding up oil out of fear they might get burned again. Nothin' but win all around. Which is why it'll never happen.

rst | May 1, 2008, 3:18pm | #

Why haven't they introduced gas tax holiday legislation if it's such an urgent need for the yeomen of Indiana and North Carolina?

Seems a fair question. But I thought it was always painfully obvious that Madame Carpetbagger's sole purpose in seeking a Senate seat in whatever state she could win most easily was that it was a foothold for her White House ambitions. She did next to nothing as a NYS senator, so I'm not surprised that she isn't taking any of her stupid ideas to the Senate floor.

Brandybuck | May 1, 2008, 3:21pm | #

Why haven't they introduced gas tax holiday legislation if it's such an urgent need for the yeomen of Indiana and North Carolina?

Ummm, because they're senators, and the constitution says that it's a congressmen who get to introduce bills like that. That's the United States Constitution as in "we da peeps!"

J sub D | May 1, 2008, 3:28pm | #

She did next to nothing as a NYS senator, so I'm not surprised that she isn't taking any of her stupid ideas to the Senate floor.

She's going for the gold vis a vis earmarks this year.

rst | May 1, 2008, 3:32pm | #

She's going for the gold vis a vis earmarks this year.

Selling earmarks to shore up and reward key supporters serves her own interests, not New York State's. And it further imperils the state's ability to obtain any money it might actually need.

Reinmoose | May 1, 2008, 3:37pm | #

I don't understand why democrats aren't championing high gas prices. Finally something comes along that has the chance of changing people's consumption habits to benefit the environment, via the market..... oh, I guess I answered my own question.

jtuf | May 1, 2008, 3:40pm | #

Great question. With all three presidential candidates in the Senate, their campaigns should consist of introducing the legislation they favor.

Guy Montag | May 1, 2008, 3:41pm | #

Ooh-er, take that, you beltway-bound snobs! You can imagine the wheat stalk idling between his teeth as Garin rocks back and forth on his porch and cradles his shotgun.

That sounds so bitter.

Who is that person who posts here and mentions that the gas tax should not fund public transportation, metrorail and the like? P Brooks? Good idea. Where are the politicians who support that good idea?

Counting down to all the people who think that reducing a tax, even if it means that the producers of a product get to keep a little more of the profits that they earned, is a bad thing. In 3 . . . 2 . . . 1 . . .

Guy Montag | May 1, 2008, 3:42pm | #

Is Hillary Clinton still a senator? Is John McCain? Why haven't they introduced gas tax holiday legislation if it's such an urgent need for the yeomen of Indiana and North Carolina?

thought McCain had one all written up and ready to toss to the House? Is he acting like a RINO again?

Guy Montag | May 1, 2008, 4:22pm | #

OT: Great news for the National Parks. Now if we could just get rid of the National Park System, that would be a serious improvement.

voxpo | May 1, 2008, 4:35pm | #

Maybe I need to break open my economics textbook, but I don't quite get this. The idea is that if we cut the gas tax, demand will rise and push the price right back to where it is, right? So...what if we raise the gas tax? Demand declines and we end up with the same price yet again? And if we raise it again? Can we raise it to $3.20 and still have a price of $3.45/gallon? I need a generic ibuprofen.

Calidore | May 1, 2008, 4:40pm | #

Guy Montag,

What is the libertarian argument against national parks (or government owned parks in general)?

Vlad Drac | May 1, 2008, 4:42pm | #

Metallica "Fuel" sucks. Anthrax "Fuel" rules. That is all.

x,y | May 1, 2008, 4:44pm | #

Calidore -

On topic joke:

Republicrat: You libertarians would allow prostitutes in public parks!

Libertarian: What do you mean public parks?

Guy Montag | May 1, 2008, 4:46pm | #

What is the libertarian argument against national parks (or government owned parks in general)?

Not being an official libertarian spokesperson or anything, I would say it is because the land is best tended/used in private hands.

There is that issue about how and what the federal government is allowed to own, per the Consitiution and parks are not in the set, but I will let the lawyers and constitution experts do that one.

Gilbert Martin | May 1, 2008, 4:48pm | #

"Why haven't they introduced gas tax holiday legislation if it's such an urgent need for the yeomen of Indiana and North Carolina?"

Why haven't they introduced legislation to get rid of the multiple regional gas formulation requirements that raises the cost of refining gas or the requirement of using ethanol instead of MTBE as a gas additive that raises costs or elimination of the restrictions on drilling in ANWAR and the outer continental shelf that has resticted domestic supply?

I'd also like to see them answer the question of how they can be so committed to reducing gasoline costs for the public as they want us to believe they are and also be in favor of carbon taxes or carbon cap and trade schemes that will have the exact opposite effect on gas costs.

Guy Montag | May 1, 2008, 4:51pm | #

voxpo,

Yea, you have that goofy argument pegged.

Somehow "evil oil" can charge whatever they please and if the add-ons are removed, they will charge more. I wonder why they are not charging $10/gallon, and if that silly argument were true they would be.

It fits right in with how "teh A-rabs" are "charging us too much" for oil, that "they are pricing it too high" as if it sits on shelves at a 5 & 10 store with little labels on it that change every day at the whim of the producer.

MikeP | May 1, 2008, 4:51pm | #

voxpo,

From the last time this came up, here is the best posting I could find explaining the problem.

Be sure to follow the link to Arnold Kling's contribution too.

Guy Montag | May 1, 2008, 4:52pm | #

GM,

I'd also like to see them answer the question of how they can be so committed to reducing gasoline costs for the public as they want us to believe they are and also be in favor of carbon taxes or carbon cap and trade schemes that will have the exact opposite effect on gas costs.

I heard in another thread that it has something to do with breaking people's windows.

MikeP | May 1, 2008, 5:01pm | #

Somehow "evil oil" can charge whatever they please and if the add-ons are removed, they will charge more. I wonder why they are not charging $10/gallon, and if that silly argument were true they would be.

Evil oil can charge only what the market will bear. If they try to charge less, they will run out. If they try to charge more, they will be undercut by their less evil oil competitors.

Supplies are extremely tight, especially during the summer. Since supply cannot increase in response to greater demand, gas price at the pump cannot decrease. It isn't even as though evil oil has a choice in the matter. If they sell it for less, they will run out.

MikeP | May 1, 2008, 5:02pm | #

I should add the necessary disclaimer from the last time this came up...

Note that the observation that a gas tax holiday won't benefit the consumer is due entirely to the "holiday" part of it. Three months is simply not enough time for producers to ramp up supply to take advantage of the new 18.4 cents per gallon surplus available -- especially the three months when supplies are tightest. If the tax holiday were made permanent, then prices would drop for consumers as producers found it worthwhile to invest in increasing future supply.

reminder | May 1, 2008, 5:19pm | #

weigel, I think you forgot to mention Ron Paul's racist news letters...? we mustn't let that slip through the cracks.

prolefeed | May 1, 2008, 6:02pm | #

And I should add the necessary disclaimer that MikeP is, again, wrong on this issue. If you cut taxes on gasoline, it will cost less. If you raise taxes on gasoline, it will cost more. The legislature eliminated the General Excise Tax on gasoline in Hawaii, thus reducing the tax by 15 cents per gallon, and the price of gasoline in Hawaii versus all the other states promptly dropped by ... wait for it ... about 15 cents a gallon. Hawaii was the highest priced gas by statewide average in the nation, now it is the fourth-highest priced gas by statewide average in the nation.

Let's think of it a different way. If some thug is standing by a gas pump pointing a gun at you and demanding you fork over an extra buck a gallon in "taxes", and then the police roll up and arrest the guy before he collects the extortion, will the cost of the gasoline still be the extortion-included price? Taxes are just a thinly disguised version of that.

MikeP | May 1, 2008, 6:11pm | #

1. Have you got a reference I can check out?

2. Was the supply of gas in Hawaii exceptionally tight? Had there been an unruly run up in prices prior to the lifting of the tax?

P Brooks | May 1, 2008, 6:17pm | #

It's amazing how politicians can compartmentalize their thinking. Incentives matter, when they are talking about sin taxes; higher taxes on cigarettes obviously and undoubtedly cause lower consumption, and they're all for that. However, they glibly call for a reduction of the gasoline tax, while (as far as I can tell) implicitly assuming consumption will unaffected by a reduction in price.

I expect the price would, in fact, drop by the amount of the suspended tax initially, for the simple reason that the EvilOilBarons would be shamed into it, by widespread reporting of the price differential; however, the price would inevitably begin to climb after some brief interval. And be blamed on increased demand.

joe | May 1, 2008, 6:23pm | #

Was the supply of gas in Hawaii exceptionally tight? Had there been an unruly run up in prices prior to the lifting of the tax?

Uh...dimand kurve?

Smarty-pants questions like that are a sign of socialism, you know.

MikeP | May 1, 2008, 6:25pm | #

I gather from newspaper articles that this event happened in July of 2007.

Interestingly, while Hawaii enjoyed their 15 cent tax holiday, the average gas price in the US dropped 25 cents.

See this Hawaii gas price history. Select "USA Average" for Area 2.

And the graph also shows that the answer to my question #2 is... No, there is no indication that supplies were tight or prices were rising -- meaning, of course, that the argument for why a federal gas tax holiday won't lower pump prices today didn't apply in Hawaii in July of 2007.

MikeP | May 1, 2008, 6:28pm | #

Oh, I almost forgot question #3...

3. Was the elimination of the General Excise Tax on gasoline in Hawaii a "holiday" or was it permanent?

As I note in my disclaimer, the argument that prices won't fall does not apply if the drop in tax is permanent.

MikeP | May 1, 2008, 6:39pm | #

Come to think of it, Hawaii is an excellent example for the price effects of a tax cut.

Their contribution to the demand of the nation as a whole is small, and their willingness to pay more for their gasoline due to transportation costs is high. I would guess they have a completely elastic gasoline supply, and most of a local gas tax cut would be passed to the consumer.

Similarly, if any single state were to drop its portion of the gas tax, most of the savings would be passed to the consumer even if supplies were tight simply by bidding up the price of gasoline imported from other states. (Note: Does not apply in California.)

The federal gas tax holiday, however, applies market wide. Supply can't magically appear from across the border.

pinko | May 1, 2008, 6:54pm | #

"I don't understand why democrats aren't championing high gas prices. Finally something comes along that has the chance of changing people's consumption habits to benefit the environment, via the market..... oh, I guess I answered my own question."

Reinmoose, you might actually want to ask one instead of answering your own questions. I'm a Dem and I think about $5 a gallon for the next 3-4 years or so would have all kinds of positive outcomes, the best of which would be watching the Hummer fetish set whine like little bitches. How's that?

Kolohe | May 1, 2008, 7:27pm | #

Fwiw, the HI gas market is also skewed by a chokepoint in refining capacity that is even more pronounced than anywhere on the mainland.

Plus that oil provides 85% of electrical production as opposed to the nationwide average of 2%.

I think the answer to question 3 (yes it is permanent) more or less answers prolefeed's question.

However, the decrease did occur a step function, not a slow continuous drop to a new equilibrium.

Kolohe | May 1, 2008, 7:39pm | #

I would guess they have a completely elastic gasoline supply, and most of a local gas tax cut would be passed to the consumer.

And you mean a completely inelastic supply, right? There are some number of tankers that offload into the two refining facilities every month. This inflow is really hard to alter (although potentially easier to cut off, as the Japanese found on their four islands 65 years ago), thus creating a vertical supply curve, right?

MikeP | May 1, 2008, 7:52pm | #

And you mean a completely inelastic supply, right?

No, I do mean elastic. Admittedly it is a guess.

I base that guess on the recent development of gasoline itself regularly running around on tankers -- due largely to the strapped refineries in the US. I would think that one of them could stop in Hawaii without too much trouble. Hawaii would just need to bid a bit more for it -- an easier task if their tax is dropped.

Whether gasoline tankers stop in Hawaii is, of course, a matter of fact or not. Any verification of the possibility?

Kolohe | May 1, 2008, 8:34pm | #

Here is an extremely painful to read website. But, it states something that could also affect supply/demand equilibrium: in addition to a disproportionate amount of oil being used for electricity, a larger proportion of oil is refined to jet fuel than the national average (30% vice 9%)

And here (pdf) is a two year old report on HI energy resources. It looks like there is about a 9:1 ratio in barrels of crude to barrels of 'refined product' that comes in.

jacksmith | May 1, 2008, 9:45pm | #

MY FELLOW "BITTER", STUPID, WORKING CLASS PEOPLE :-)

If you think like Barack Obama, that WORKING CLASS PEOPLE are just a bunch of "BITTER"!, STUPID, PEASANTS, Cash COWS!, and CANNON FODDER. :-(

You Might Be An Idiot! :-)

If you think Barack Obama with little or no experience would be better than Hillary Clinton with 35 years experience.

You Might Be An Idiot! :-)

If you think that Obama with no experience can fix an economy on the verge of collapse better than Hillary Clinton. Whose ;-) husband (Bill Clinton) led the greatest economic expansion, and prosperity in American history.

You Might Be An Idiot! :-)

If you think that Obama with no experience fighting for universal health care can get it for you better than Hillary Clinton. Who anticipated this current health care crisis back in 1993, and fought a pitched battle against overwhelming odds to get universal health care for all the American people.

You Might Be An Idiot! :-)

If you think that Obama with no experience can manage, and get us out of two wars better than Hillary Clinton. Whose ;-) husband (Bill Clinton) went to war only when he was convinced that he absolutely had to. Then completed the mission in record time against a nuclear power. AND DID NOT LOSE THE LIFE OF A SINGLE AMERICAN SOLDIER. NOT ONE!

You Might Be An Idiot! :-)

If you think that Obama with no experience saving the environment is better than Hillary Clinton. Whose ;-) husband (Bill Clinton) left office with the greatest amount of environmental cleanup, and protections in American history.

You Might Be An Idiot! :-)

If you think that Obama with little or no education experience is better than Hillary Clinton. Whose ;-) husband (Bill Clinton) made higher education affordable for every American. And created higher job demand and starting salary’s than they had ever been before or since.

You Might Be An Idiot! :-)

If you think that Obama with no experience will be better than Hillary Clinton who spent 8 years at the right hand of President Bill Clinton. Who is already on record as one of the greatest Presidents in American history.

You Might Be An Idiot! :-)

If you think that you can change the way Washington works with pretty speeches from Obama, rather than with the experience, and political expertise of two master politicians ON YOUR SIDE like Hillary and Bill Clinton..

You Might Be An Idiot! :-)

If you think all those Republicans voting for Obama in the Democratic primaries, and caucuses are doing so because they think he is a stronger Democratic candidate than Hillary Clinton. :-)

Best regards

jacksmith... Working Class :-)

p.s. You Might Be An Idiot! :-)

If you don't know that the huge amounts of money funding the Obama campaign to try and defeat Hillary Clinton is coming in from the insurance, and medical industry, that has been ripping you off, and killing you and your children. And denying you, and your loved ones the life saving medical care you needed. All just so they can make more huge immoral profits for them-selves off of your suffering...

You see, back in 1993 Hillary Clinton had the audacity, and nerve to try and get quality, affordable universal health care for everyone to prevent the suffering and needless deaths of hundreds of thousands of you each year. :-)

Approx. 100,000 of you die each year from medical accidents from a rush to profit by the insurance, and medical industry. Another 120,000 of you die each year from treatable illness that people in other developed countries don’t die from. And I could go on, and on...

OBAMA AIDE: "WORKING-CLASS VOTERS NOT KEY FOR DEMOCRATS" :o

DEBATE! DEBATE!! DEBATE!!!...

prolefeed | May 1, 2008, 9:50pm | #

MikeP: They eliminated the GET tax on gas in Hawaii, and the prices immediately dropped at the pump by the amount of the tax. The prices before the tax cut used to fluctuate around 40 cents above the national average and we consistently had the highest gas prices in the nation; now we are routinely lower than several states, and the prices fluctuate around 25 cents above the national average.

See this to check out how we're third in the nation for regular, sixth for premium, and somewhere in the vicinity of 25 cents above the national average. (Or at least we were yesterday when I did research for a letter to the editor advocating even lower gas taxes and removing the fucking ethanol mandate.)

The tax cut immediately dropped the prices, and kept them lower, because the politicians at the state capitol were not raking off an extra 15 cents per gallon. What is so damned hard to understand about lower taxes causing lower prices? Conversely, what would be so hard to understand about higher taxes causing higher prices?

jacksmith | May 1, 2008, 10:02pm | #

DEBATE! DEBATE!! DEBATE!!!

It's time for everyone to face the truth. Barack Obama has no real chance of winning the national election in November at this time. His crushing defeat in Pennsylvania makes that fact crystal clear. His best, and only real chance of winning in November is on a ticket with Hillary Clinton as her VP.

Hillary Clinton seemed almost somber at her Pennsylvania victory speech. As if part of her was hoping Obama could have proved he had some chance of winning against the republican attack machine, and their unlimited money, and resources.

But it is absolutely essential that the democrats take back the Whitehouse in November. America, and the American people are in a very desperate condition now. And the whole World has been doing all that they can to help keep us propped up.

Hillary Clinton say's that the heat, and decisions in the Whitehouse are much tougher than the ones on the campaign trail. But I think Mr. Obama faces a test of whether he has what it takes to be a commander and chief by facing the difficult facts, and the truth before him. And by doing what is best for the American people by dropping out of the race, and offering his whole hearted assistance to Hillary Clinton to help her take back the Whitehouse for the American people, and the World.

Mr. Obama is a great speaker. And I am confident he can explain to the American people the need, and wisdom of such a personal sacrifice for them. It should be clear to everyone by now that Hillary Clinton is fighting her heart out for the American people. She has known for a long time that Mr. Obama can not win this November. You have to remember that the Clinton's have won the Whitehouse twice before. They know what it takes.

If Mr. Obama fails his test of commander and chief we can only hope that Hillary Clinton can continue her heroic fight for the American people. And that she prevails. She will need all the continual support and help we can give her. She may fight like a superhuman. But she is only human.

Sen. Hillary Clinton: "You know, more people have now voted for me than have voted for my opponent. In fact, I now have more votes than anybody has ever had in a primary contest for a nomination. And it's also clear that we've got nine more important contests to go."

Sincerely

Jacksmith... Working Class :-)

Pug | May 1, 2008, 10:12pm | #

That poor working stiff Hillary rode to work with looked like he was having a lot of trouble filling up the F-250 he commuted in.

I'm wondering if the F-250 might be part of the guy's problem. Not to be an elitist or anything, but he might consider something that gets a little better gas mileage. I wonder if he's thought of that.

I haven't seen anyone mention that the gas tax is used to fund highways. In that sense, it is more of a user fee. If highway funds don't come from the gas tax, they still have to come from somewhere. I guess we can always borrow some more. Or maybe let more of our bridges collapse. We can go either way.

jacksmith....working class implies some of us might be idiots. He leaves no doubt about himself, though. Especially since I've seen him post the exact same comment in quite a few other places. He thinks it's a masterpiece.

Guy Montag | May 1, 2008, 10:15pm | #

MikeP,

Evil oil can charge only what the market will bear. If they try to charge less, they will run out. If they try to charge more, they will be undercut by their less evil oil competitors.


I was saying the same thing as a smartass.

Guy Montag | May 1, 2008, 10:21pm | #

MikeP,

So what is all so bad about the producers of the gasoline making a better profit on it, IF your worst fears are realized?

In other words, how is it better for the government to take the profits than the producer to reap them?

Please, skip that nonsense about the highway fund being tapped. It is getting tapped so that inner-city METROrail users can rde dirty on the backs of gasoline buyers.

Guy Montag | May 1, 2008, 10:29pm | #

pinko,

Reinmoose, you might actually want to ask one instead of answering your own questions. I'm a Dem and I think about $5 a gallon for the next 3-4 years or so would have all kinds of positive outcomes, the best of which would be watching the Hummer fetish set whine like little bitches. How's that?

So, if the earth cools for the next 10 years can we skip your crazy, expensive, scheme?

Oh, just caught the last part. This is all just a fashion issue to you, hun?

rst | May 1, 2008, 11:00pm | #

It should be clear to everyone by now that Hillary Clinton is fighting her heart out for the American people.

Please tell me you're joking.

Gilbert Martin | May 1, 2008, 11:06pm | #

"I haven't seen anyone mention that the gas tax is used to fund highways. In that sense, it is more of a user fee."

Yes it is a user fee but the fee is too high because of highway trust fund money being siphoned off for mass transit projects AND becuase every highway construction project is more expensive than it should be because of the Davis-Bacon Act - a political giveaway to labor unions that ensures that construction contractors can't use cheaper non-union labor because they are required to pay the "prevailing wage" (i.e. union pay scale).

That has been in effect for about 70 years and there's no telling how many billions, probably trillions of the taxpayers money has been wasted on inflated construction costs over that time because of this. Not just on highway projects but ANY government construction project.

rst | May 1, 2008, 11:28pm | #

I haven't seen anyone mention that the gas tax is used to fund highways. In that sense, it is more of a user fee.

If it's not a private road, a user fee is a tax.

And even people who don't drive on the highway at all, or whose "user fee"-to-highway mileage ratio is somewhere in the stratosphere, have to pay it.

MikeP | May 2, 2008, 12:06am | #

So what is all so bad about the producers of the gasoline making a better profit on it, IF your worst fears are realized?

In other words, how is it better for the government to take the profits than the producer to reap them?

I don't believe I have argued that it was better that government get the tax than that oil companies get the profit. I merely contend that the consumer won't see a summer gas tax holiday as a drop in price at the pump.

MikeP | May 2, 2008, 12:21am | #

What is so damned hard to understand about lower taxes causing lower prices? Conversely, what would be so hard to understand about higher taxes causing higher prices?

I have offered many reasons why a gas tax reduction in Hawaii would or might be reflected as a lower price for the consumer. Chief among them is, as Kolohe noted, is that in the disclaimer at 5:02pm that you sarcastically riffed off of.

A permanent reduction in a gas tax should result in a lower price at the pump. I said as much. And, if it is well advertised, one should expect it to be immediate unless there is some serious supply problem -- which the price trend prior to the tax being ended in Hawaii does not show.

MikeP | May 2, 2008, 12:27am | #

What is so damned hard to understand about lower taxes causing lower prices? Conversely, what would be so hard to understand about higher taxes causing higher prices?

Repeating a comment from a couple days ago...

In any tax on a product, regardless of who nominally pays the tax, some portion is paid by the the producer and the balance is paid by the consumer. Who pays which fraction depends on the ratio of the elasticities of supply and demand. With supply utterly strapped as in the current situation, the oil companies are paying almost the entire 18.4 cents tax today. So if the tax is lifted, they simply will stop paying it. The price at the pump won't change because anyone who tries to drop the price will run out of their limited supply.

You can take a look at the "Who Pays Taxes" section about a third of the way down David Friedman's Price Theory chapter 7. See Figure 7-7a.

Guy Montag | May 2, 2008, 8:00am | #

The real political issue here, that will continue to be hinted at but never stated by the pro-tax people, is that the people who produce or buy gas fund the transportation of people who do not. If the highway trust fund were actually used only for construction and improvement of public roads that would be one thing. If a majority of that portion were used outside of WV (do they still get 50% of the highway fund?) it would be better.

However, the fact is, that the "city people" are being carted around in busses and trains paid for by "country people".

The other issue is who really deserves the profit from a product, the government or the producer? I say the producer. I am sure there are some Socialists here who will disagree.

joe | May 2, 2008, 10:32am | #

Transportation works as a system.

Getting people off of the most congested roadways during peak periods provides additional capacity for those who drive.

90% of the rush hour trips into Manhattan are via public transit. Just how much of the city's land area would you devote to additional lanes to provide that much capacity, Guy?

Hat Pines | May 2, 2008, 2:19pm | #

You can blame greedy oil companies or envriontmentalists.

the high oil prices are due to Peak Oil